Standing Committee D

Thursday 24 January 2002

(Morning)

[Mr. Alan Hurst in the Chair]

9.30 am

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble): I beg to move,

That the Standing Committee recommends that two days be allotted for Consideration and Third Reading of the Commonhold and Leasehold Reform Bill [Lords].

The motion has been discussed, so I do not need to explain it.

Question put and agreed to.

Clause 160

No forfeiture notice before determination of breach

Question proposed, That the clause stand part of the Bill.

Dr. Brian Iddon (Bolton, South-East): I wish to discuss forfeiture in detail, as it is one of the most important provisions of the Bill. Hon. Members will have seen that I tabled an amendment to clause 159, which would have deleted clause 160 and the two subsequent clauses. The amendment was not selectedI have no complaints about thatand I hope to discuss those issues when we deal with new clause 12. However, it seems preferable to deal with forfeiture in general at this stage.

The Bill has been around a long time. It was published as a draft Bill under the modernisation procedures introduced by the Government, and there was a long period of consultation. In December 2000, the Department of the Environment, Transport and the Regions published a summary of proposals following that consultation. Paragraph 12 of that document states:

''We accept the need for effective sanctions against defaulters. But we do not believe it is right that a landlord can gain a windfall profit by obtaining absolute possession at the expense of the leaseholder. Instead, we propose that where the landlord obtains possession, the leaseholder should be compensated for the loss of his interest after deducting monies owed to the landlord.''

Sadly, there is no sign of legislation on that point in the Bill, which disappoints hon. Members on both sides. More particularly, it will disappoint the many citizens who have been troubled by forfeiture.

To give them their due, the Government propose to implement the other proposals on abuse of the forfeiture procedure listed in the DETR document, which is available on the internet. In my opinion and that of many others that does not go far enough. The

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abolition of forfeiture has long been talked about in the Labour party and I believed that we would abolish it through mechanisms contained in the Bill.

There is plenty of support for my view. The Council of Mortgage Lenders, whose headquarters is in Savile Rowwhere else? represents 98 per cent. of the residential lending market. The council wrote on 21 January to the Leasehold Enfranchisement Association. I quote selectively from the letter. It said that:

''While some reforms have already been made to limit the circumstances where landlords can pursue forfeiture action, further amendments are still necessary. These should ensure that the mode of recourse available to landlords is evenly balanced against the alleged breach, and so avoid the automatic use of outmoded and draconian proceedings.''

The Committee should note the word ''outmoded'' and the phrase ''draconian proceedings''. Many people believe that that describes forfeiture well. As I shall try to illustrate, it is a one-way street, with everything going in the landlord's favour.

Ben Young, the chief executive of the Retirement Lease Housing Association, wrote to me on 15 January. He was the first developer in the country to start building retirement housing more than 30 years ago and he supports the abolition of forfeiture. He reckons that few landlords will, but he is one of the few. He says that

''there are good reasons why Forfeiture should now be abolished''

and he gives three:

''1. Good landlords do not need it. In my eleven years leading RLHA, we have not once needed to resort to Forfeiture. Certainly disputes arise from time to time, but these are pursued through the normal debt recovery procedures.

2. The threat of losing one's home is a draconian''

note the use of the word ''draconian'' again

''measure which is usually out of all proportion to the scale of the debt even where proven, and can cause great human distress and misery to leaseholders when threatened without justification, as is often the case.

3. The remedy of Forfeiture appears archaic in the modern legal context which seeks to create a fairer balance of the rights of individuals at Law, and it helps to perpetuate the discredited reputation of leasehold tenure.''

In a letter of 16 January, the Leasehold Enfranchisement Association states that the key points about forfeiture are:

''(i) It is a punishment that far outweighs the crime and, as such, runs contrary to natural justice.

(ii) It is a sanction which involves loss of home and, as such, trades on emotional vulnerability. It is unacceptably invasive.

(iii) It is argued by the protagonists of forfeiture that the courts do not like to award it and it can therefore be regarded merely as a useful deterrent. However, sufficient numbers of cases do occur for a '146 notice' to be a source of psychological terror and extreme domestic anxiety.''

Those strong words come not from Members of Parliament, but from people who deal in the property market.

On 17 January, the housing aid and legal centre of the Brighton Housing Trust wrote to the Brighton and Hove District Leaseholders Association, which passed the letter to me. The letter states:

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''On occasions, leases are so drafted that service charges are described as being 'by way of further rent'. This gives freeholders a right to issue Legal Proceedings for Forfeiture without the necessity of having the service charge dispute resolved, either in the County Court or before the Leasehold Evaluation Tribunal . . . Often a mortgagee will pay sums demanded on account of the threat of forfeiture, as forfeiture would result in the total loss of their security i.e. all monies lent.''

That means that building societies force people to take action because they do not want to lose their money. The letter continues:

''the use of forfeiture is wholly disproportionate to the value of the dispute.''

Harry Spillman, the chairman of the Brighton, Pavilion constituency Labour party, also forwarded me a letter. He refused to pay his maintenance charges when his kitchen ceiling started to collapse. His landlords threatened forfeiture, but Harry hired a solicitor, who convinced them that they were in breach of covenants. Three years laternote the delayHarry's ceiling was repaired. That is not natural justice, which is why I say that forfeiture is a one-way street, with everything going in the landlord's favour.

I have had other letters from property developers and leasehold associations, all of which support the views expressed in those quotes. I will mention a few that might suggest how drastic forfeiture is and what misery it causes so many people.

Barry Gardiner mentioned a good example in which the London borough of Camden took a case to court because the leaseholder owed £1,266.38 for service charges and ground rent. The property was secured through forfeiture and was worth £350,000. In cities, especially London, property values are on that scale. That property was forfeited without any attempt, as Barry Gardiner reminded us

The Chairman: Order. The hon. Gentleman is referring to the hon. Member for Brent, North (Mr. Gardiner).

Dr. Iddon: I apologise, Mr. Hurst. The hon. Member for Brent, North told us that the London borough of Camden carried out no investigation. Instead, the Camden New Journal investigated the matter. Although there is no direct evidence, it has been suggested that the owner has been undergoing psychiatric treatment for two years. The flat has been taken from a vulnerable person and he has lost £350,000. In Britain in 2002, is that justice?

All members of the Committee will know about the next case, which has had some publicity in The Times. It is about a young woman called Fiona MacMillan, who has given me permission to use it as an example. She owned a flat in London that was subject to successful forfeiture procedures, so she too lost a flat, presumably an expensive one. Even worse, she has now been lumbered with a bill for £90,000 in legal costs, and has had a breakdown.

Fiona MacMillan wrote to me on 22 January and said that, since she heard that the Bill was under discussion, she felt sick and had been physically sick in the street. She is convinced that she has cancer and her

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general practitioner has told her that her problems have been caused by the stress of the forfeiture that she went through being reignited by our Committee. She is probably one of thousands subject to forfeiture procedure whose lives have been ruined. She was a graduate and had a good job in London, and has now forfeited her job as well as her flat.

I can give several examples of threats of forfeiture proceedings by a company called DMH.

The Chairman: Order. The clause is relatively narrow, albeit on forfeiture. The hon. Gentleman is obliged to keep his remarks on the clause and not make a Second Reading speech.

Dr. Iddon: Thank you for your guidance, Mr. Hurst. I was trying to limit my remarks to forfeiture, but it is important to show how forfeiture arises from people owing small sums to landlords, who then threaten forfeiture and literally make people ill. I have a bill from DMH that threatens a 73-year-old man with forfeiture, but I take your guidance, Mr. Hurst, and will not dwell on such examples. However, we know of a substantial number of threats of forfeiture. In one case, the owner of a flat worth £70,000 was threatened with forfeiture for owing less than £200. Landlords could recover money in ways other than forfeiture, such as normal court procedures and putting a charge on the property.

As a final example, I shall mention a lady who wrote to me. In a month, her expenditure is £442 and her outgoings are £343she has set the figures out for mewhich leaves her about £100 to live on. Her block of flats has a reserve fund but, for some reason of which I am not aware, it is depleted and there is no money for basic maintenance. The landlord is using the clever ploy of trying to make the residents pay £6,000 in total to replace eight bay windows. Such people do not have the money to pay. The residents argue that the work should be done when the reserve fund has reached the necessary level again. More money should be called into the reserve fund, but the landlord is not prepared to take what we would see as a commonsense action. He threatens forfeiture for not only the lady who wrote to me, but all the tenants in the block unless they pay up.

9.45 am

I am vigorously opposed to forfeiture. I thought that we had a great opportunity under this Labour Government to do justice to all our citizens. Although my party has supported abandonment of forfeiture for many years, the issue has received support across the parties. The Government should take action to ban forfeiture. New clause 12, which I have tabled, would ban it. Thank you for your perseverance, Mr. Hurst.